- •Contents
- •Preface
- •Table of legislation
- •Table of cases
- •Introduction
- •1.1 Convergence
- •1.2 Path-dependence
- •1.2.1 Politics
- •1.2.2 Economics
- •1.2.3 Culture
- •1.2.4 Social and commercial norms
- •1.2.5 Legal mentalities
- •1.3 Functional convergence
- •1.4 Summary of the analysis
- •2 Paper transfers
- •2.1 The historic starting point
- •2.2 Law and equity
- •2.3 Legal title and registration
- •2.4 Equitable title
- •2.4.1 Equity and transfers of registered securities
- •2.4.2 Legal nature of an equitable (beneficial) interest
- •2.4.3 Acquisition of an equitable (beneficial) interest
- •2.4.4 Equitable title and specific performance
- •2.4.4.1 Enforceable contract
- •2.4.4.2 Claimant must be ready and willing to perform
- •2.4.4.3 Specific or ascertained assets
- •2.4.4.4 Damages are an inadequate remedy
- •2.4.4.5 Conclusions
- •2.4.5 Equitable title on appropriation of securities and payment of purchase price
- •2.4.6 Equitable title on delivery of transfer documents
- •2.4.7 Express trusts
- •2.4.8 Conclusions
- •2.5 Summary of the analysis
- •3 Dematerialisation
- •3.1 Talisman
- •3.2 The need for reform
- •3.3 CREST
- •3.3.1 Introduction
- •3.3.2 Legal title
- •3.3.3 Equitable title
- •3.3.4 Conclusions
- •3.4 The 2001 reforms
- •3.4.1 Introduction
- •3.4.2.1 Effect of entries on registers: shares
- •3.4.2.2 Effect of entries on registers: public sector securities, corporate securities other than shares
- •3.4.2.3 Conclusions
- •3.4.3 Legal title
- •3.4.4 Equitable title
- •3.4.5 Conclusions
- •3.5 Summary of the analysis
- •4 Impact on the institutional framework
- •5 Defective issues
- •5.1 Introduction
- •5.2 Novation
- •5.2.1 Novation by operation of law
- •5.2.2 Novation by contract
- •5.2.3 Novation as a fiction
- •5.3 Defective issues and estoppel
- •5.4 Securities as negotiable rights
- •5.5 Summary of the analysis
- •6 Unauthorised transfers
- •6.1 Introduction
- •6.2 Certificated securities and estoppel
- •6.2.1 Restoration of the legal owner’s name on the register
- •6.2.2 Liability of the issuer
- •6.2.3 Liability of the person who instructed the issuer to amend the register
- •6.2.4 Conclusions
- •6.3 Uncertificated securities and estoppel
- •6.3.1 Restoration of the legal owner’s name on the register
- •6.3.2 CRESTCo’s liability for forged instructions
- •6.3.3 Liability of the issuer
- •6.3.4 Securities as negotiable rights
- •6.3.5 Conclusions
- •6.4 Summary of the analysis
- •7 Indirect holdings
- •7.1 Introduction
- •7.2 Certainty of intention
- •7.3 Certainty of subject matter
- •7.3.1 Tangible goods
- •7.3.2 Registered securities
- •7.3.3 Analysis
- •7.3.3.1 Academic commentators
- •7.3.3.2 US authority
- •7.3.3.3 Policy considerations
- •7.3.3.4 Law reform
- •7.3.4 Conclusions
- •7.4 Summary of the analysis
- •8 Conclusions on English law
- •9 The historic starting point
- •9.1 Securities as intangibles
- •9.2 Shortcomings of the law of assignment
- •9.3 Theories overcoming the law of assignment
- •9.3.1 Nature of the instrument
- •9.3.2 Contract
- •9.3.3 Transfer by novation
- •9.3.4 Conclusions
- •9.4 Securities as tangibles
- •9.5 Summary of the analysis
- •10 Paper transfers
- •10.1 Transfer of ownership
- •10.1.1 German Law
- •10.1.2 Austrian law
- •10.1.3 Conclusions
- •10.2 Unauthorised transfers
- •10.2.1 Introduction
- •10.2.2 German law
- •10.2.3 Austrian law
- •10.2.4 Conclusions
- •10.3 Defective issues
- •10.3.1 German law
- •10.3.2 Austrian law
- •10.3.3 Conclusions
- •10.4 Summary of the analysis
- •11 Impact on the institutional framework
- •11.1 Indirect holdings
- •11.2 Immobilisation
- •11.3 Global certificates
- •11.4 Government bonds
- •11.5 Summary of the analysis
- •12 Immobilisation and its legal analysis
- •12.1 Genesis of the statutory regime
- •12.1.1 1896 German statute
- •12.1.2 Depotgesetz 1937
- •12.2 Relationship between clients and their intermediary
- •12.3 Co-ownership
- •12.4 Transfer of co-ownership
- •12.4.1 Introduction
- •12.4.2 Depotgesetz
- •12.4.3 German property law
- •12.4.4 Global certificates and Government bonds
- •12.4.5 German Government bonds
- •12.4.6 Austrian law
- •12.4.7 Conclusions
- •12.5 Unauthorised transfers
- •12.5.1 German law
- •12.5.2 Austrian law
- •12.5.3 Conclusions
- •12.6 Defective issues
- •12.7 Summary of the analysis
- •13 Evidence of convergence?
- •16 Legal doctrine and market infrastructure
- •17 Implications for convergence
- •17.1 UNIDROIT draft Convention
- •17.2 EU Legal Certainty Project
- •Select bibliography
- •Index
180 G E R M A N A N D A U S T R I A N L A W
certificates made out by the issuer, the issuer is estopped from proving that the rights to which the securities refer have not been validly created. This is similar to the German and Austrian doctrine on the same point. All three jurisdictions classify securities certificates as containing a representation by the issuer that the rights they relate to have been validly created; the purchaser relying on this representation is protected against equities arising out of the original issue.
10.4 Summary of the analysis
In this chapter, the rules governing transfer of German and Austrian securities were analysed. The analysis was based on the assumption that securities are held directly without the assistance of an intermediary and leads to two conclusions. Germany and Austria, on the one hand, and English law, on the other, analyse securities and their transfers through different legal doctrines. Notwithstanding these differences, all three jurisdictions achieve outcomes that are, to some extent, similar.
In both German and Austrian law, securities are transferred by way of delivery of the securities certificate to the buyer. In addition, the buyer and seller need to agree that ownership is to be transferred to the buyer. Under Austrian, but not under German, law there exists a third requirement for ownership to be transferred to the buyer. For the buyer to become the owner of the securities under Austrian law, there needs to exist a valid sales contract between buyer and seller.
The German and the Austrian rules are different from the rules adopted by English law. Germany and Austria apply to transfers of securities the same rules that apply to transfers of tangibles. In contrast, England seems to rely on the law of novation when analysing securities transfers. As a result, in Germany and Austria the issuer is not involved in securities transfers. In relation to bearer securities, there is no requirement for the buyer’s name to be entered on a securities register.
The rules adopted by Germany and Austria, respectively, are, however, also similar to the rules prevailing in English law. In all three jurisdictions the delivery of the certificate relating to securities is a requirement that can cause the buyer to acquire a proprietary right in the securities. In Germany and in Austria, the delivery of the certificate is necessary for the buyer to acquire full ownership of the securities; in English law the delivery of securities certificates can cause the buyer to acquire equitable ownership in the securities.
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In German and Austrian law, the buyer is protected against claims relating to the fact that the seller was not authorised to sell the securities concerned. The rules protecting the buyer impose the risk of an unauthorised transfer upon the owner of the securities. The rules achieving this result are identical to the rules governing tangibles. The orthodox view is that the same rules that apply to tangibles also apply to securities because securities are to be classified as tangibles.
In England, buyers are also protected against unauthorised transfers, but under a doctrine different from German and Austrian law. England uses the rules on estoppel and the risk of an unauthorised transfer is primarily imposed on the issuer rather than on the owner of the securities.
In Germany and Austria, the buyer is protected against equities arising out of defective issues through a doctrine that is similar to the English rules on estoppel. Securities certificates are considered to contain a representation that the rights to which the certificates relate have been validly created. The issuer is bound by this representation and is unable to raise equities against the purchaser in good faith of securities.
This chapter also contained an analysis of the rules in Germany and Austria governing transfers of securities that are directly held. It was assumed throughout the chapter that investors keep securities certificates themselves and do not employ an intermediary. In chapter 11, the impact of the rules governing securities on the type of the institutional framework prevailing in Germany and Austria will be examined.